This Is Why Homeowners Are Still Winding Up On The Street Even As Their Loans Are Modified

Daniel Goodman / Business Insider
It's called dual tracking - when one arm of a mortgage lender works with homeowners to modify their loan while another arm starts the foreclosure process simultaneously.

Since it could take months for their loan modification application to make its rounds, whichever process is completed first could be the one that sticks.

"From a lender's perspective, you don't always know that the modification or short sale is going to come to fruition, so they'll continue to move forward with the foreclosure at the same time," says Rick Allen of Mortgage Marvel. "The unfortunate part is it's not always transparent to the consumer. The consumer assumes that if they're working on the modification then the (foreclosure) process has stopped."

"(Applying for a loan modification) was this never-ending process," said Haskamp. "I'd send them the paperwork, then they'd say they lost it or never got it and ask for it again a few months later."

And while the bank tries to figure out which route it'd rather take - giving Haskamp and her husband the boot or making good on their loan modification - the couple is stuck in court fighting to keep the roof over their head.

Dual tracking has been on lawmaker's mile-long list of lender issues to address for ages and part of last week's $25 billion mortgage settlement includes new mandates that will hopefully bring an end to the practice.

The key is ironing out wrinkles in communication by requiring lenders to appoint a single person as the go-between for the mortgage servicer and the borrower. The problem is that any agreement reached under the settlement will apply only to the 40 states that are involved.

U.S. Rep. Rosa DeLauro, D-Conn. introduced a bill just last month proposing the same idea for her state, including outlawing dual tracking altogether.

"This bill requires servicers to do these things that would seem like common sense," Jeff Gentes, an attorney with the Connecticut Fair Housing Center, told the Centers for Responsible Lending. "The administration, when it came in, in 2009, tried a lot of carrots. Now it's stick time."